Puerto Rico ’s Half-Hearted Stab at Fiscal Reform Threaten’s the Island’s Long-Term Prospects

Puerto Rico Governor Ricardo Rossello and Federal Oversight Board Chairman Jose Carrion III will be in Washington this week to testify before Congress on the progress the Commonwealth has made since President Obama signed The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) into law last summer. At the time, the press heralded the legislation as a bipartisan achievement and a legislative victory for House Speaker Paul Ryan, but that declaration of victory is beginning to appear a bit premature.Eight months later, and six weeks before the bill ’s stay on litigation expires, Governor Rossello and Chairman Carrion are expected to put forth a rosy picture of the situation on the status of PROMESA. However, it’s clear that the island’s government is headed in the wrong direction, precisely because the Commonwealth has failed to adhere t o the tenets of the law.The intent of PROMESA was to help Puerto Rico resume economic growth and achieve fiscal solvency after a decade of recession and budget deficits. Once that occurred the next goal was the eventual return to capital markets: since its default on general obligation bonds —which the island’s constitution explicitly guarantees—Puerto Rico has been shut off from capital markets.PROMESA attempted to facilitate negotiations with the island ’s many creditor groups. One way it did so was by imposing a stay on any litigation related to the island’s default on its secured bond payments. The stay ex...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs